Friday, January 27, 2012

With the rise of international trade, there has also been a movement by national governments to protect their domestic industries against what they deem to be unfair trade practices.

One common way to do this is through anti-dumping duties (ADD) and countervailing duties (CVD). The United States, in particular, has a robust framework for imposing such duties. On November 22, 2011, the U.S. Department of Commerce initiated ADD and CVD investigations in relation to carbon welded steel pipe imports from several countries – including the Sultanate of Oman, as well as the United Arab Emirates. This article summarizes what anti-dumping and countervailing duties are and how the U.S.’s ADD/CVD process works.

What is dumping?

“Dumping”, as defined by WTO Agreement, is when an exporting country sells goods abroad at a price which is lower than that in its home market or below its cost of production.

To combat dumping, authorities in the importing country may seek to charge anti-dumping duties on imports that they determine to be sold at “less than fair value” and which cause material injury or threat of injury to domestic producers. Such anti-dumping duties are levied in addition to normal customs duties to offset the price advantage that the dumped products would otherwise enjoy.

Countervailing duties

Countervailing duties are similar to anti-dumping duties, except that countervailing duties are particularly meant to offset the benefit of subsidies which injure a domestic industry in the importing country.

Pursuant to the WTO Agreement on Subsidies and Countervailing Measures, authorities must determine the following for each alleged subsidy:• A financial contribution by the government of the exporting country;• A benefit received by producers in the exporting country; and• The government program in the exporting country meets the specificity test.

Overview of the U.S. ADD/CVD process

Under U.S. law, U.S. producers are entitled to have anti-dumping and countervailing duties imposed on foreign producers that export to the U.S. if:• The U.S. Department of Commerce (DOC) finds that foreign exporters are dumping or receiving subsidies; and;• The U.S. International Trade Commission (ITC) find that targeted imports have caused or threatened material harm to the domestic industry in the U.S..

AD/CVD proceedings typically proceed through the following stages:• Filing of a petition by representatives of the U.S. domestic industry, and initiation by the U.S. government;• ITC preliminary injury investigation and determination;• DOC preliminary investigation of subsidies;• DOC final investigation of subsidies and final determination;• ITC final investigation and determination of injury; and• If order is imposed, annual reviews to calculate specific dumping liability.

The foreign government perspective

These trade cases – particularly CVD cases – often have important implications for the home government of the foreign exporters. In most cases, the primary concern of the foreign government will be the defence of its subsidy programs throughout the U.S. authorities’ investigation process.

It should be noted that it is not possible for a company exporter itself to advance a legitimate defense to a CVD case. Under the law and practice, the Government is a “mandatory respondent” that is required to submit information AND to certify its accuracy. If a defense is to be advanced, it must include active government participation.

Beyond the specific case and products at issue, the government has a broader interest in defending its subsidy programs. The main risk which the Government of Oman should aim to avoid in the instance CVD case is the establishment of adverse precedent on the subsidy determinations which the U.S. authorities would apply in future ADD/CVD cases against that foreign country’s exporters. Naturally, this risk is particularly acute for countries that are newly exposed to ADD/CVD cases, for which precedent has not yet been formed.

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